Critical to our understanding of the developmental potential of stem cells and subsequent control of their differentiation in vitro and in vivo is a thorough understanding of the genes that control stem cell fate. Here, we report that Foxd3, a member of the forkhead family of transcriptional regulators, is required for maintenance of embryonic cells of the early mouse embryo. Foxd3-/- embryos die after implantation at approximately 6.5 days postcoitum with a loss of epiblast cells, expansion of proximal extraembryonic tissues, and a distal, mislocalized anterior organizing center. Moreover, it has not been possible to establish Foxd3-/- ES cell lines or to generate Foxd3-/- teratocarcinomas. Chimera analysis reveals that Foxd3 function is required in the epiblast and that Foxd3-/- embryos can be rescued by a small number of wild-type cells. Foxd3-/- mutant blastocysts appear morphologically normal and express Oct4, Sox2, and Fgf4, but when placed in vitro the inner cell mass initially proliferates and then fails to expand even when Fgf4 is added. These results establish Foxd3 as a factor required for the maintenance of progenitor cells in the mammalian embryo.